Chapter 7: Nationalism & Economic Growth Section 2: The Challenges of Growth Pages: 231-237

The Challenges of Growth THE ECONOMY: (231) During the War of 1812, embargoes and naval blockades all but stopped the flow of European products to the United States Now, Americans are forced to produce their own goods - This gave U.S. manufacturing a BIG boost By 1815 many of the Republicans who formerly opposed a strong central government were now calling for national measures to promote manufacturing and to strengthen the country’s financial system

The Challenges of Growth THE ECONOMY: (231) Many people began to agree with the Federalist view that to remain strong the United States needed to balance the needs of agriculture, commerce, and manufacturing

The Challenges of Growth THE ECONOMY: (231) The War of 1812 also revealed weaknesses in the nation’s financial system. By mid-1814 the war had drained the U.S. Treasury Without the Bank of the United States, which Congress had refused to re-charter in 1811, the Treasury had to rely on state banks for loans. Instead of borrowing from one central bank, the government had to negotiate with many banks PROBLEMS: Each bank printed it’s own notes, in amounts far exceeding the specie - gold or silver coins Banks refused to accept other banks notes

The Challenges of Growth THE ECONOMY: (231) Wartime also highlighted the nation’s transportation problems. With British ships blocking sea trade, merchants had to transport goods overland. This slowed delivery and increased the cost of goods

The Challenges of Growth THE AMERICAN SYSTEM (232-234) The War of 1812 had convinced many older Republicans to support a stronger federal government – Chief among these “Nationalists” was Representative Henry Clay of Kentucky

The Challenges of Growth THE AMERICAN SYSTEM (232-234) CLAY’S IDEA: (232) Henry Clay (Kentucky): worked as a state legislature, served as a US Senator and a member of the House of Representatives (Speaker of House in 1811) He developed the office of Speaker of the House into a powerful position

The Challenges of Growth THE AMERICAN SYSTEM (232-234) CLAY’S IDEA: (232) Clay is probably most noted for his proposal to increase federal involvement in the economy, known as the American System The American System had three main features Called for a national bank to provide sound currency and free the government from having to borrow from many different banks Called for a protective tariff to encourage industrial development Called for a strong national transportation system to unite northern manufacturers, western farmers, and southern planters Second Bank of United States Created

The Challenges of Growth THE AMERICAN SYSTEM (232-234) THE TARIFF OF 1816: (232-233) Too many British-made goods flood the United States after the Treaty of Ghent. So, Congress passes the Tariff Act of 1816, which placed a 25 cent duty (tax) on most imported factory goods – making American goods more competitive The tariff enjoyed wide support among northern manufacturers The tariff did not have support from New England importers and southern planters who relied on British trade.

The Challenges of Growth THE AMERICAN SYSTEM (232-234) TRANSPORTATION (234) John C. Calhoun angered many southerners by introducing a bill to fund a national system of roads and canals, using money from tariffs. Calhoun said, “Let us…bind the republic together with a perfect system of roads and canals,” Calhoun told Congress During Thomas Jefferson’s presidency, Congress had authorized construction of a roadway from Cumberland, Maryland, across the Appalachian Mountains into the western territories. In 1815 construction of the Cumberland Road, later called the National Road, began. By 1818 the road reached as far as what is now Wheeling, West Virginia, and was later extended to Vandalia, Illinois

The Challenges of Growth THE AMERICAN SYSTEM (232-234) TRANSPORTATION (234) Although most canals and roads were built by the states or private companies, Calhoun argued that the great scale of such undertakings required federal assistance Many members of Congress agreed, and Calhoun’s bill passed President Madison opposed federal aid for roads and canals, however. As his last act in office, Madison vetoed the bill, claiming that it overstepped federal powers

The Challenges of Growth THE AMERICAN SYSTEM (232-234) TRANSPORTATION (234) Despite the lack of federal support, in 1817 New York began one of the most ambitious transportation projects of the era – the Erie Canal. The 363-mile-long canal was intended as a cheaper and faster route to and from the interior of the country than roads.

The Challenges of Growth THE TRANSPORTATION REVOLUTION: (234-237) Before 1820 poor transportation made it difficult to sell manufactured goods and farm products between regions CANALS AND STEAMBOATS (234) Midwestern farmers faced the most severed transportation problems Canal construction soared, though, after the Erie Canal opened. The canal reduced the cost of moving goods between Buffalo, New York, and New York City by more than 90%. Impressed by this cost reduction, other states launched massive canal projects

The Challenges of Growth THE TRANSPORTATION REVOLUTION: (234-237) CANALS AND STEAMBOATS (234) Improvement in steamboat construction also aided transportation to the interior. Robert Fulton’s Clermont, completed in 1807, was the first steamboat capable of carrying heavy loads upstream.

The Challenges of Growth THE TRANSPORTATION REVOLUTION: (234-237) Locomotives: (236) Trains had one big advantage over steamboats – they could go anywhere the tracks could be laid Early locomotives were plagued by mechanical troubles. As a result, few people were surprised when the Tom Thumb, the first commercially successful steam locomotive in the United States, lost a race against a horse-drawn train. In the 1840s, American companies spent more than $200 million laying nearly 9,000 miles of track

The Challenges of Growth THE TRANSPORTATION REVOLUTION: (234-237) THE MARKET REVOLUTION (236) By making it easier and cheaper to move farm products, raw materials, and manufactured goods long distances, road and canal systems created the first national markets Market Revolution: the creation of a national market; it increased farmers’ and manufacturers’ profits and changed the way they worked and did business. Linking small towns to larger markets increased the size of many towns, particularly in the Midwest

The Challenges of Growth THE INDUSTRIAL REVOLUTION (236-237) EARLY INDUSTRIALIZATION A shift to machine production was part of the Industrial Revolution, a period of dynamic changes in manufacturing. The industrial revolution began in Britain in the mid-1700s with the invention of new spinning machines The machines revolutionized the textile industry by allowing for MASS PRODUCTION, which is the manufacture of large quantities of goods

The Challenges of Growth THE INDUSTRIAL REVOLUTION (236-237) EARLY INDUSTRIALIZATION Fearing foreign competition, British officials tried to keep their new technology a secret. Samuel Slater memorized machine plans down to the last detail. Slater came to the United States to make a fortune. He did with the construction of a British-style spinning mill Eli Whitney – used interchangeable parts in the manufacture of firearms. He reasoned that various musket parts could be machine-produced in mass quantities and used interchangeably in making individual weapons

The Challenges of Growth THE INDUSTRIAL REVOLUTION (236-237 ECONOMIC REVERSAL: Many manufacturers borrowed money from state banks to finance new enterprises. These banks tended to lend money freely, regardless of a borrower’s credit history Late in 1818 the Second Bank of the United States ordered state banks to demand repayment of all loans. It also required state banks to exchange their notes for gold and silver. FEW BANKS COULD DO THIS The result was the Panic of 1819, a chain reaction of bank failures, falling land prices, and foreclosures. The nation quickly sank into an economic depression that lasted several years

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